March 24, 2026 — U.S. stock indices fell sharply as escalating conflict in the Middle East sent crude oil prices surging and pushed bond yields higher, stoking inflation fears. The S&P 500 Index dropped 0.80%, while the Dow Jones Industrial Average fell 0.83%. The technology-heavy Nasdaq 100 Index declined 0.98%.
Geopolitical Tensions Fuel Market Volatility
Markets reacted to renewed hostilities as Iran launched missile and drone strikes on several cities in Israel and U.S. bases in the region. The attacks, occurring on the twenty-fifth day of the conflict, disrupted regional stability. Saudi Arabia reported intercepting a drone in its eastern region, and Kuwait said some power lines were knocked out of service.
According to a report from The Wall Street Journal, Saudi Arabia and the United Arab Emirates have taken steps toward joining the conflict. Saudi Arabia agreed to give the U.S. military access to King Fahd Air Base. The UAE closed an Iranian-owned hospital and club, signaling growing frustration among Iran’s neighbors.
Commodities and Bond Markets Under Pressure
West Texas Intermediate crude oil futures jumped more than 4% in the session. The 10-year U.S. Treasury note yield rose 6 basis points to 4.40%. Rising energy prices have boosted inflation expectations, putting downward pressure on bond prices.
Supply pressures also weighed on Treasuries as the U.S. government prepared to auction $69 billion in 2-year notes. This auction is part of a broader slate of $211 billion in Treasury note and floating-rate note sales this week.
Strait of Hormuz Closure Disrupts Global Supply
The closure of the Strait of Hormuz continues to choke global energy flows. Approximately one-fifth of the world’s oil and natural gas travels through this waterway. Iran’s attacks on shipping have forced Gulf producers to cut output because they cannot export from the region.
The International Energy Agency stated on March 11 that the conflict is disrupting 7.5% of global oil supply. The agency warned the war could cut global supply by 8 million barrels per day this month. It also released 400 million barrels from emergency stockpiles to alleviate shortages.
More than 40 energy sites across nine Middle Eastern countries have been severely damaged, according to an IEA assessment. These damages could prolong supply chain disruptions even after hostilities end. Analysts at Goldman Sachs have warned that crude prices could exceed the 2008 record high near $150 per barrel if flows through the Strait of Hormuz remain depressed.
Economic Data Presents Mixed Signals
U.S. economic reports provided conflicting cues for investors. Fourth-quarter nonfarm productivity was left unrevised at 1.8%. However, unit labor costs for the same period were revised upward to 4.4% from an initial 2.8%, surpassing expectations of 3.6%.
The March S&P Global manufacturing Purchasing Managers’ Index unexpectedly rose 0.8 points to 52.4. This reading indicates expansion and was stronger than the forecasted decline to 51.5.
Overseas, the Eurozone March manufacturing PMI rose to 51.4, marking the strongest pace of expansion in nearly four years. The UK’s manufacturing PMI also remained in expansion territory at 51.4.
Notable Stock Movers and Sector Performance
Software companies led the market lower. Atlassian fell more than 7%, while ServiceNow, CrowdStrike Holdings, Datadog, and Workday each dropped over 4%. In the Dow Jones Industrial Average, Salesforce declined more than 4%.
Asset managers faced pressure after Apollo Global Management said it was capping redemptions from its Apollo Debt Solutions fund at 5% of outstanding shares. Apollo’s stock fell more than 3%, as did shares of Ares Management.
Estee Lauder shares plunged more than 7%, adding to a steep decline from the previous session on news it was nearing a deal to acquire Puig Brands. Dollar General fell over 4% after announcing a CEO succession plan effective in 2027.
Some stocks bucked the negative trend. Netgear surged more than 10% after the U.S. Federal Communications Commission ordered a ban on imports of new foreign-produced consumer wireless routers. Smithfield Foods rose over 6% after reporting stronger-than-expected quarterly revenue.
Central Bank Policy in Focus
Markets are now assessing the potential for tighter monetary policy. Swaps markets are discounting a 61% chance of a 25-basis-point rate hike by the European Central Bank at its next meeting on April 30. For the U.S. Federal Reserve, the probability of a similar hike at the April 28-29 meeting is priced at about 8%.
ECB Governing Council member Boris Vujcic, who is set to become the central bank’s Vice President in June, said policymakers must be “very agile and vigilant” to keep prices in check. He cited stagflation risks brought closer by the war.
The market’s direction will likely hinge on developments in the Middle East and incoming economic data. A brief rally occurred earlier in the week after U.S. officials indicated a temporary pause in strikes to facilitate talks. However, the sustained rise in energy prices and bond yields suggests investor concern over prolonged inflation remains elevated.
This article was produced with AI assistance and reviewed by our editorial team for accuracy and quality.
